Is giving a discount actually costing you business?

Discounting your products and services is not unlike paying people to be friends with you. They never stick around if you don’t pay up.

Discounts actively kill relationships

Discounts are a bad habit for both the business and the customer because they lead to an unhealthy relationship. The business is artificially setting the customer’s pricing expectations lower. So later, if the price is higher, the customer feels disappointed like they’ve been cheated. No one stays in a relationship that’s perpetually disappointing.

Creating disappointment is one major reason for the backlash against Groupon and LivingSocial’s business strategies. When you sacrifice value in the beginning of the relationship (i.e. tell people your goods aren’t worth as much and discounting them), they won’t believe you later when you tell them the value is worth much more. The customer’s expectations have already been set, and the discounting business has trained them to equate value with price. In the end no one is truly happy.

Why not give more and increase the pie?

Instead of lowering prices or discounting, it’s better to find a way to add on and give gifts. The relational benefits of giving more far outweigh the minimal short term boost of discounting.

But base your gifts on the relationship

Give gifts based on where you are in the relationship. Like in the beginning of any budding relationship, it’s always customary to give small gifts that mean something to the other party. So find small ways to celebrate your new relationship. If the client extends the relationship, by referring or showing loyalty, they should get a small gift.

These simple gestures will cultivate the quality relationships your business needs to stay afloat. And they are MUCH cheaper than discounts in the long run.

Think of alternatives to discounts, what can you add?

In addition to relationship gifts, have something around that costs you very little but will mean the world to your customers and clients. You should never underestimate the power of the random gift. Gifts are always that much more enjoyable when they are unexpected.

So, if someone asks for a discount in the future, tell them “No! But…” then give them the small but meaningful gift that you prepared for them. The gift is always much more appreciated.